There are a number of very pressing issues with which the House should deal. Yesterday Allied Irish Banks issued an interim management statement ahead of its annual general meeting tomorrow. The developments alluded to in the statement are extremely disturbing. The bank now expects its bad debt charges for 2009 will be of the order of €4.5 billion. Loans that are vulnerable, on watch or impaired have increased in the first quarter of the year by €9 billion up to €24.3 billion. Mortgage arrears are rising and now stand at 2% of the total book.

The banking sector is deteriorating day by day. Just two months after the detailed analysis of its loan book, Allied Irish Banks is now stating its outlook is even worse than the worst case scenario it envisaged. It stated last year it did not have any problems at all, but we now find ourselves in extreme uncertainty and danger. If this is mishandled or got wrong by the Government, it will have the potential to sink the economy entirely. On the basis of well accepted assumptions internationally, the IMF estimated that, on the basis of the Government's policies, the cost to the taxpayer of bailing out banks could be as high as €24 billion, which sum would not be available for schools, hospitals, education, policing or the next generation. This would obviously be a disaster of unprecedented proportions. The response of the Government has been dictated to date by the needs of the bank, without great regard to taxpayers or their customers.

Consider the decision to save Anglo Irish Bank last September, at which time we were not told the full truth that there had been a massive run on the bank. A decision was made to recapitalise it when it was obvious to all that its business model was broken and that it had lost the trust of regulators, depositors and the public. The decision to invest €7.5 billion in Allied Irish Banks and Bank of Ireland which allowed for the nursing of dodgy developer-related debts without any credible commitments to extend credit to the hard pressed and struggling small and medium enterprise sector and the latest decision, on foot of a short report, to buy €90 billion worth of unsellable toxic property debt from the banks, to be managed by the State, were made, although virtually every single economist not on the Government's payroll had said this was the wrong direction in which to go. Who or what is dictating policy? Is it the banks or the public interest? For whom or what has the Government more respect? Is it the banks, the international bond markets that funded the banks or the taxpayer?

I will comment responsibly in reply to some of what the Deputy has had to say. I make it clear to him, as we have always done, that it is the public interest and no other factor which motivates the Government in this matter. Any suggestion to the contrary is just fanciful on the Deputy's part. The Opposition contends continually during the course of the election campaign that this is about bailing out banks. It is important to point out that it is not about bailing out banks but about trying to help those who depend on the banking system, including Irish businesses and individuals who require credit to conduct their affairs. Thus, we need a working banking system. The European Commission has approved the recapitalisation in the proposal we put to it in accordance with the EU guidelines that have been set out. The issue of trying to ensure funding for our banking system is based on the need to put our public finances in order and to ensure we provide the right policies in our general banking system, and that is what we have been doing. I reject the suggestion by Deputy Kenny that there is some way of dealing with the issue of impaired assets without actually identifying them and putting them somewhere else. The uncertainty created in the market due to the size of these impaired assets is hindering the normalisation of credit availability in the Irish banking system. Far from not introducing proposals and making decisions, the Government is determined to do whatever is necessary to assist. The setting up of the National Asset Management Agency, NAMA, is a similar model to that used in other parts of the world where there have been banking crises in the past.

I have never attempted to impugn the Taoiseach's integrity, but his understanding of the public interest is in question here. He is right in stating that such systems have been used in other places. I assume he has studied, for example, what happened in France in the mid-1990s when a similar agency was set up to acquire €28 billion of toxic assets and €18 billion in capital was lost as a consequence. If we make a similar calculation for Ireland, we could be talking about a loss of €33 billion if we continue with the NAMA project the Government appears intent on carrying out.

In the context of the public interest, I ask the Taoiseach, as head of Government, to stop and think about the interest of the Irish taxpayer before he goes too far down this road. Based on the figures, which have been assessed at €90 billion, we could well be exposing the taxpayer of the next generation to a further €70 billion in debt, and we may well find at the end of the process that there is little to recover. In recognising what the problem is, it is possible to deal with it without creating another problem in the form of NAMA. Why will the Government not consider what Deputy Bruton has been proposing on behalf of Fine Gael for quite some time? We should invest in clean banks with no toxic assets which would be considered by international markets and other financial agencies with a degree of trust. In this way we could avoid exposing the taxpayer to a potentially catastrophic and devastating economic future.

The Government is going down a very dangerous road in proceeding with the recommendation on NAMA. The figure of €90 billion that has been arrived at for all loans given by guaranteed banks to developers may well expose the taxpayer and future taxpayers to an additional national debt of €70 billion. That would be unforgivable. For the sake of the public interest — which is what we are all focused on, although the Taoiseach may have a different version of it from me — is it not possible for the Taoiseach to stop and think before he goes down this road? We should invest whatever resources the State has in clean banks that will attract further finance and allow credit to flow to businesses, which, as he has agreed, are the economic lifeblood of our country and important for our future. This is a critical decision for the Government to make, and the recommendation of Fine Gael is that the State should invest its resources in clean banks rather than allow this potential catastrophe to face the already beleaguered Irish taxpayer.

As I have said to Deputy Kenny already, the purpose of transferring the banks' impaired assets to NAMA is to allow the banks to strengthen their balance sheets and reduce the uncertainty regarding the level of bad debt held by them. This should in due course allow banks to provide credit to the economy on a commercial basis, which is necessary as there is currently no functioning market for those assets. In the absence of market-generated values, a valuation method will be put in place to establish the appropriate values of the assets transferred to NAMA. The Deputy has been bandying about figures for book value, although of course there would be major discounts on valuations taken by banks and by those who own the debts.

Twenty billion euro worth.

It is important that we ensure we put in place the correct methodology for valuing the assets to be transferred. It is a key priority for Government to ensure we have a robust and consistent approach to valuation. The European Commission has provided guidance to member states on the treatment of impaired assets, including a detailed set of requirements for the valuation of such assets and, as set out in this guidance, the valuation of the assets transferred to NAMA will be certified by an independent expert and validated by the supervisory authority. The commission will have an expert valuation panel involving the European Central Bank to assess the valuation methods of all member states. We are working within the guidelines set out by the Commission with regard to impaired assets. A recognition——

The Taoiseach should not blame the Commission.

I am simply explaining that the model being used by the Government is in line with guidelines that have been outlined — the toolkit, as it was described by the German Chancellor, Angela Merkel — in respect of the initiatives Governments need to take to ensure a greater degree of market certainty, to identify the level of impaired assets and to park those assets so the banks can have access to funding and credit on wholesale markets and thereby provide the finance people need in our domestic economy. That is the purpose of our method of dealing with this issue, which is in line with the guidelines set out by the EU.

The figures do not add up.

Fine Gael's figures are "hey presto" economics.